We turned at the brink – now urgency in addressing obstacles is paramount - News24

We turned at the brink – now urgency in addressing obstacles is paramount - News24

16 February 2018 - At the time, the reformist view – which we likened to the experience of the verligte Afrikaners – was broadly rubbished as being outside the bounds of possibility. While the scenario we have subsequently lived through was certainly not the upside one – we continued to hold out the possibility of an ANC reformation, forced by political and economic realities, in two books published on South Africa's future, the first in 2014 and the second in 2017.

By Frans Cronje

South Africa's sense of renewed optimism is warranted and welcome, but formidable obstacles stand between us and our long-term political stability and economic success.

Urgency in addressing them is paramount.

The past six weeks have seen extraordinary political developments in South Africa and the prospects for the country look a great deal better than a year ago. Yet quite where these events will lead our country must still be determined.

In 2013, five years after Polokwane, the Institute for Race Relations (IRR) produced skeleton scenarios on the future of political parties.

We argued that despite the then negative nature of so many political, civil rights, and policy trends, there were very important signs of embryonic reformist tendencies.

At the time, the reformist view – which we likened to the experience of the verligte Afrikaners – was broadly rubbished as being outside the bounds of possibility. While the scenario we have subsequently lived through was certainly not the upside one – we continued to hold out the possibility of an ANC reformation, forced by political and economic realities, in two books published on South Africa's future, the first in 2014 and the second in 2017.

Most especially after the events of the past 24 hours, it will soon be forgotten how very close we came to disaster. In a comment ahead of the ANC's December elective conference last year, we wrote that "[our baseline] model now shows that Mr Ramaphosa has a delegate majority of 50.27% and that the delegate split is therefore below 50", while warning that "the skilful engineering of ANC branch politics" may erode that lead but that, "if his camp can minimise the rigging and intimidation, he may go on to win – that is now where the battle lies".

Ultimately his camp did achieve exactly that, securing a majority of 179 votes or 51.8%.

But split the 179 number in half and if just 90 out of almost 5 000 delegates had voted differently, then Jacob Zuma would have given the State of the Nation speech last week, the currency would have weakened severely, the state capture project would have been in firm control, and South Africa's long-term prospects would have been dire – as we repeatedly warned through the year.

We turned literally at the brink.

Now Mr Zuma has resigned, Mr Ramaphosa is South Africa's president, we are led to believe that Mr Zuma may be charged with corruption, some of the Gupta family have been taken into custody, and law enforcement agencies have executed raids across the country. Firm action against state capture, re-establishing the rule of law, and accountable governance are necessary conditions for South Africa to reach its potential as a free and prosperous society. The signs are positive, but we must see that this action translates into scores of criminal convictions – including of people who still hold high office.

This is, however, only one of the terrains to watch in order to determine what happens next for our country.

The second terrain is that of the economy and the living conditions of people.

Notwithstanding the many successes achieved by the ruling party in raising living standards over the past 20 years, the challenges that remain are daunting:

- To reduce the black unemployment rate to the white rate will require creating a net 1 million new jobs every year for the next decade – at an economic growth rate of 5% we will get halfway there.

- The budget deficit remains at a multiple of the economic growth rate which is estimated this year to underperform emerging market averages by a considerable extent

- Less than one in ten children is getting a very good school leaving qualification – one capable of placing that child on a sure track into the middle classes

Polling last year established that people too young to remember apartheid are considerably more sceptical about the ANC than those who remember the time. We also continue to emphasise the very high levels of coincidence between job creation, household incomes, and popular confidence in the future of the country.

The new administration of Mr Ramaphosa will need to move swiftly to introduce the policy reforms needed to secure much higher levels of fixed investment in order to bring about the growth and job creation to buttress the sense of renewal and optimism that has accompanied his rise to power. Should they fail at this, then, in time, they may see public opinion turn against them – and when such opinion turns it is a cruel master.

As far as the future scenarios go, we now have the opportunity to upgrade our view from what we call the Break-Up (in the main, a mostly free and open society but one that underperforms comparable emerging markets on most economic measures) to the Rise of the Rainbow (essentially a free and open society averaging growth rates of above 5% of GDP).

To help us make that call we employ 20 qualitative and quantitative indicators that range from labour market policy to consumer confidence levels. These are themselves ranked across five measures that range from regression to advancement or recovery.

To be clear; to upgrade the scenario means that we are confident, for example, that the number of maths passes in matric will quadruple, economic growth levels will sustain averages above 5%, and the unemployment rate will be halved over the next decade. And, of course, so early in the transition we do not yet have the necessary hard evidence.

As for the short term, our hard economic and political calls are now that:

- The GDP growth rate will recover to between 1.7% and 1.9% this year and South Africa may escape a ratings downgrade if the right sort of person makes a compelling case for economic growth in the budget speech next week.

- Mr Ramaphosa will unite the ANC and the party will win a majority of between 61% and 63% in the next national election, while the DA will see very limited growth and may lose control of its cities (or some of them) should the EFF return, in one form or another, to the ANC after the next election.

The ANC result should not surprise; its delivery record is better than many of its critics allow and, even with Mr Zuma at the helm, we were confident of its securing a 2019 majority – of, we thought, close to 58%.

Should the administration of Mr Ramaphosa use his mandate for the single-minded pursuit of investment-led economic growth, South Africa may emerge over the next decade as one of the world's most exciting emerging markets and we may be well on our way to becoming a stable middle income economy.

*Frans Cronje is a scenario planner and heads the IRR – a think-tank that promotes political and economic freedom. This article is drawn from a recent address to a forecasting dinner in Johannesburg.